Gigem77

No Renewed Bull Phase for Metals Miners Just Yet

Well, well, gold is over 835 and crude is over 121. Another swing and a miss, Bill.

The forward hedge book is smaller than it has been in a decade. ABX still has a sizeable hedge, but most have reduced or eliminated their hedges altogether. Companies like AUY hedge their base metal production and leave their gold fully unhedged.

No Renewed Bull Phase for Metals Miners Just Yet

The dollar index is 70% euros and yen. The rest are background noise. It's running into considerable resistance. It was not helped by the fact that FNM and FRE were shredded today. Crude is back to 116. Gold is 40 bucks off the low of last week.

No Renewed Bull Phase for Metals Miners Just Yet

The dollar rally is the result of a large short position unwinding. The sharp correction in some commodities is likewise a technical event. It is logically incorrect to extrapolate the short term unwinding of trades into a dollar "bull" market.

The dollar is attached firmly to the continued crap out in the financial sector. FNM and FRE are headed for government takeover and their shares will go to zero. Will LEH fail? WM? When the FDIC needs more money, what will the effect be on the dollar?

Predicting the Bottom in Gold

August is the seasonally weakest month for precious metals. This has been a pattern for years. 2006 was the only exception in the last 8 years. So it's the cycle low for GG and all the others. Last year GG bottomed in August and doubled by December. This year the oversold condition is extreme, setting up a big move higher.

The driver for the CRB is oil and oil bears failed again to close below 112. How many more times will they beat their brains out on that wall before they cover, reverse and go long? T. Boone says 110 will hold. OPEC says 100 will hold. OPEC has control of what little spare capacity still exists in world supply. Oil will lead the CRB and gold higher.

Read the IEA Interim report omrpublic.iea.org/curr...

Non-OECD demand is growing 3.8% per year, more than compensating for the drop in OECD demand. World demand is still growing.

During the 4 weeks of spec liquidation and shorting in crude, gasoline demand increased week over week. There has been no demand destruction, just demand suppression. As the price declines, that demand comes back.

This sharp 5 week dislocation in commodity prices was caused by hedge fund speculation, not by fundamentals. The lower prices are causing resurgence in demand.

Leveraging Up on Precious Metals Ahead of Fed Meeting

What are the differences between now and the week after the last fed statement? For one thing there is the slide into the seasonally weakest month for gold and silver. But there is another larger difference. What was happening to the price of oil and the CRB then and what is happening now? What was happening to tech stocks and financials then and what is happening now? It isn't the same.

Have you heard of catching a falling knife? The fed spoke and stocks rallied. The miners did not. CSCO beat estimates and took off after hours. Why will anybody buy miners this week? Financials, tech, pharma, even refiners are drawing the attention of buyers, but miners are drawing shorts along with the oil and gas companies. Every bounce has been shorted and as you point out, there is no uptick rule anymore.

SLW missed their earnings estimate. They have a bad habit of doing that and silver and gold are still breaking down. Take a look at this gold chart by Dan Norcini. www.jsmineset.com/cwsi...

This is a classic head and shoulders topping pattern that may target another 20 dollar drop in gold. Gold is following oil, as are the rest of the CRB components. Oil broke below another support level today. It might stop falling tomorrow. But why not wait and see?

Why buy something that is falling? Why not wait for a tradeable bounce? I'm waiting for the selling to be exhausted. When SLW and the E&P companies begin to move up again, they will be easy to buy. They fell so hard and so fast that there are millions of shares held by stranded longs who will sell as the prices rise just to get out even.

There is one chance for a long trade. Watch the EIA weekly petroleum report tomorrow at 9:30 ET. If it moves oil higher, gold and silver will bounce. We need to see some big draws in crude and gasoline. They need to be larger than expected. Also, it will help if the demand numbers show some recovery. Then we can snap off a daytrade on some of these miners and oil companies. But it will take time to repair the technical damage done to these stock prices, so for the next week or two, they are more likely to consolidate than take off higher. And if we get greater than expected builds in oil and gasoline, look out below.